Re Western Australia v Bond Corporation Holdings Ltd; Wardley Australia Ltd; Lawrence Robert Connell; Wardley Australia Securities Ltd Rothwells Ltd; (In Liquidation) and James Phillip Yonge [1992] FCA 38 (10 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: STATE OF WESTERN AUSTRALIA
And: BOND CORPORATION HOLDINGS LTD.; WARDLEY AUSTRALIA LTD.; LAWRENCE ROBERT
CONNELL; WARDLEY AUSTRALIA SECURITIES LTD. ROTHWELLS LTD.; (In Liquidation)
and JAMES PHILLIP YONGE
Nos. WA G115, 116 and 118 of 1990
FED No. 28
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Practice and Procedure - pleadings - compliance with rules of pleading - failure to plead material facts - pleading of unnecessary facts - misleading or deceptive conduct - negligence - fraud - fraudulent failure to disclose - complex pleading - pleading of implied representations - reliance upon express representations to like effect - incorporation of some paragraphs by reference in others - whether abuse of process - State agreements and payment - whether Parliamentary or other authority to be pleaded.

Trade Practices Act 1974 s.52, s.82

State of Western Australia v Bond Corporation Holdings Limited and Ors [1990] FCA 522; (1991) ATPR 41-081

State of Western Australia v Bond Corporation Holdings Limited (1991) 28 FCR 68

State of Western Australia v Bond Corporation Holdings Ltd and Ors (1991) ATPR 41-129

State of Western Australia v Bond Corporation Holdings Limited and Ors (1991) 41-130

State of Western Australia v Wardley Australia Limited and Ors (1991) 30 FCR 245

Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477

State of Western Australia v Bond Corporation Holdings Ltd (1991) 30 FCR 245

New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455

Munday and Shreeve v State of Western Australia and Anor (1962) WAR 65

Meates v Attorney General (NZ) (1979) 1 NZLR 415

Coe v The Commonwealth [1979] HCA 68; (1979) 53 ALJR 403

Trade Practices Commission v Australian Iron and Steel (1989) 22 FCR 305

HEARING

PERTH
10:2:1992

Counsel for the Applicant: Mr E. Heenan QC and Mr J. Young

Solicitors for the Applicant: State Crown Solicitor

Counsel for the Second and Fourth
Respondents on 14 and 15 January 1992: Mr C.J.L. Pullin QC and Mr J. Chaney

Counsel for the Second and Fourth

Respondents on 16 January 1992: Ms A. Kennedy

Solicitors for the Second and Fourth

Respondents: Northmore Hale Davy and Leake

Counsel for the Third Respondent: Mr M.J. Stevenson

Solicitors for the Third Respondent: Jackson McDonald

Counsel for the Fifth Respondent

on 14 January 1992: Mr D. Shaw

Solicitors for the Fifth Respondent: Blake Dawson Waldron

Counsel for the Sixth Respondent: Mr G.R. Dean

Solicitors for the Sixth Respondent: Bennett and Co.

ORDER

Paragraphs 27, 50, 55 and 59 of the consolidated and further amended statement of claim are struck out.

(i) All of para 14 after the words "and Yonge" is struck out.
(ii) The last sentence of para 17 is struck out.
(iii) The words "and with the tacit support of all those persons
present" appearing in paras 19, 21 and 22, the words "and with
the tacit support of each of Connell and Yonge" appearing in
para 31 and the words "and with the tacit support of Beckwith
and Connell" appearing in para 34 be struck out.
(iv) All but the first sentence of para 26 be struck out. (v) The

words "to determine whether the State should provide a

guarantee or indemnity to NAB in relation to the proposed grant
by NAB of a credit line facility to Rothwells of an amount of
$150 million" is struck out of para 28.
(vi) Paragraphs 38, 39, 41 and 42 be amended to delete their
reliance upon the statements pleaded respectively in
paras.18(d), 18(e), 20(d) and 32(d).
(vii) Sub-paragraphs (d), (g), (i), (j) and (l) of para 60 and the
last two sentences of para 60 are struck out.
(viii) The last sentence of para 62 is struck out.

The applicant has leave to further amend its statement of claim in

accordance with these reasons.

The parties to file short written submissions on the costs of the motions within 7 days.
Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

On 24 October 1990, the State of Western Australia instituted an application in this Court for damages in respect of loss said to have been incurred as a result of its support by way of a $150 million indemnity in favour of the National Australia Bank Ltd ("NAB") for the financial rescue of the merchant bank, Rothwells Limited, in October 1987. In that action which was number 116 of 1990, the State named Bond Corporation Holdings Ltd ("Bond"), Wardley Australia Limited ("Wardley"), and Lawrence Robert Connell, formerly Chairman of Directors of Rothwells Limited, as respondents. On the same day, in action number 115 of 1990, the State sought leave to commence proceedings against Rothwells Limited (In Liquidation). On 25 October a further application, number 118 of 1990 was instituted by the State against Wardley Australia Securities Limited ("Wardley Securities"), arising out of the same events.

2. On 19 November 1990 the two actions, 116 and 118 were consolidated and programming directions given. On 20 December, two paragraphs of the statement of claim were struck out on the application of Bond Corporation Holdings Limited - State of Western Australia v Bond Corporation Holdings Limited and Ors [1990] FCA 522; (1991) ATPR 41-081. An amended statement of claim was filed on 14 January 1990. Leave to proceed against Rothwells Limited was granted by consent on 21 January. And following argument on 24 and 29 January, certain additional parts of the statement of claim were struck out on 15 February on the application of Wardley, Wardley Securities and Connell - see State of Western Australia v Bond Corporation Holdings Limited (1991) 28 FCR 68. The parts of the amended statement of claim struck out, included a claim against the two Wardley companies in respect of representations which had been introduced into the statement of claim by the amendments. This aspect of the pleading was struck out on the basis that it invoked a new cause of action outside the time limited by s.82 of the Trade Practices Act 1974. An application by Connell for leave to appeal was refused by the Full Court on 17 July 1991 - State of Western Australia v Bond Corporation Holdings Ltd and Ors. (1991) ATPR 41-129. An appeal by Wardley and Wardleys Securities was allowed on the same date to the extent that a further paragraph of the statement of claim was struck out - State of Western Australia v Bond Corporation Holdings Limited and Ors. (1991) ATPR 41-130. And an appeal by the State against the order striking out that part of the statement of claim raising the additional cause of action against the two Wardley companies was also allowed - State of Western Australia v Wardley Australia Limited and Ors (1991) 30 FCR 245. The latter decision has been the subject of an application for special leave to appeal to the High Court, which application was granted. It is expected that the substantive appeal will be argued shortly.

3. On 14 October 1991 the State filed a motion seeking an order that its action 115 against Rothwells be consolidated with 116 and 118 and an order for leave to join James Phillip Yonge, a director of Wardley and Wardley Securities, as sixth respondent. An order was also sought that the statement of claim be amended and consolidated in accordance with a minute filed with the motion. Orders to the general effect sought in the motion were made on 1 November 1991. They were expressed to be without prejudice to the right of any respondent to move to strike out the amended consolidated statement of claim and to take any limitation point arising under s.82(2) in respect of any additional cause of action introduced by the amendments that would have been available had the cause of action been the subject of a separate application filed on 14 October. Motions to strike out the amended consolidated statement of claim were to be filed by 15 November and returnable on 14 January 1992. Any party not filing such a motion was to file its defence by 29 November. Motions to strike out the amended consolidated statement of claim were filed by the first, second, third, fourth and sixth respondents. The principal elements of the causes of action relied upon by the State were set out in my judgment reported in (1991) 28 FCR 68. There have been some changes since that time as a result of amendment and consolidation but I do not propose to traverse them in detail here.

4. The consolidated statement of claim focuses upon two meetings between various representatives of the respondents and the State of Western Australia on Saturday 24 and Sunday, 25 October 1987. Representations express and implied relating to the financial position of Rothwells and the viability of a rescue plan designed to assist it with cashflow difficulties are attributed to the respondents. Certain items of information known to various of the respondents are said not to have been disclosed in these discussions. The State claims damages for misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act 1974 against the various corporate respondents and against the natural persons named as respondents on the basis that they were involved in the contraventions. It also claims damages for negligence on the part of Wardley, Wardley Securities and Yonge and damages for deceit on the part of Connell and Rothwells.

5. To the extent that a more detailed analysis of the pleadings is necessary, this will emerge in the reasons relating to particular objections on the various strike out motions.
The Wardley Objections

6. Wardley and Wardley Securities move to strike out the statement of claim as a whole and alternatively in respect of nominated paragraphs. In essence their contentions were directed entirely to the specified paragraphs. I will deal with those in turn. Some points determined in this process will also dispose of similar submissions by the other respondents.

7. For ease of classification the headings related to specific paragraphs objected to are identified by reference to the party objecting.
Wardley - Paragraphs 15, 16, 19, 21, 22, 31 and 34

8. By these paragraphs, it is alleged that during the Saturday meeting and in the presence of Connell, Beckwith, Yonge and others, Bond informed representatives of the State that Rothwells had severe liquidity problems (15(a)) and that officers of Bond Corporation, Yonge and other personnel from Wardley and Wardley Securities, with Connell and other Rothwell's personnel, had examined the financial position of Rothwells over a period of two days, enlisted financial support from many leading business identities or companies and now proposed a course to solve its liquidity problems (15(b)). Bond is also said to have represented that Connell was committing his entire personal assets of $70 million to Rothwells, $20 million of which would become equity and $50 million a subordinated debt. He told the meeting that Wardley and Wardley Securities had proposed that Rothwells undertake a capital raising of around $150 million which was being undertaken and that they would fully underwrite that capital raising. A credit line facility to Rothwells of a further $150 million was required and the NAB was willing to provide that facility but only on the strength of some form of Government guarantee or indemnity. Bond requested that the State provide such a Government guarantee or indemnity (16).

9. The statement of claim pleads the contents of the financial accounts of Rothwells for the year ended 31 July 1987 (17). Further statements made by Bond on that occasion are set out in para 18. These involved reference to data displayed on a whiteboard setting out summaries of Rothwells' balance sheet and deposits, including statements as to the total deposits, the net balance after calls, shareholders' funds and the provision for bad and doubtful debts. Bond is said to have stated:

(a) the Rothwells 1987 accounts reflected Rothwells' financial
position as at 31 July 1987; the data displayed on the
whiteboard depicted the financial position of Rothwells' based
on the accounts but adjusted to the present;
(b) after due allowance for the reduction in deposits in Rothwells
which followed the general crash on world stock markets and for
an increase in the bad and doubtful debts provision, the
Rothwells 1987 accounts including, in particular, each of the
matters pleaded in para 17, substantially reflected Rothwells'
financial position as at 24 October 1987;
(c) Rothwells was a very sound financial institution which had
substantial assets and that its current financial difficulties
were not ones of capital deficiency but of a shortage of liquidity;
(d) there was no prospect of any Government guarantee or indemnity,
if provided, being called upon;
(e) there were no substantial loans by Rothwells to Connell or to
companies, firms or partnerships in which Connell had financial
interests. On questioning on this point, it is said that Bond
replied that loans made by Rothwells to Connell or to companies,
firms or partnerships in which Connell had financial interest
did not exceed $20-$30 million at the maximum and were a trivial
proportion of the overall loan books;
(f) Bond Corporation would contribute about $20 million to the
capital raising;
(g) Bond Corporation was not charging or receiving any fee in
connection with its role in the rescue.

Paragraph 19 then goes on:

"In informing the representatives of the State as set
out in paragraphs 15, 16 and 18, Bond also acted as
spokesman for Connell, Beckwith, Yonge and the other
officers of Rothwells, Bond Corporation, Wardley and
Wardley Securities then present. His remarks were
made without dissent and with the tacit support of all
those present. In the premises each of those present
endorsed those statements."

10. Paragraphs 15 and 16 are attacked upon the basis that they play no role in establishing any cause of action by reference to the various statements pleaded in them and attributed to Bond and indirectly to other parties for whom he is said to have been spokesman. I accept that those statements are not relied upon as representations constituting misleading or deceptive conduct, negligence or fraud on the part of any party. They do, however, provide a context for the representations that follow by indicating that it is the State's case that those representations were made in support of a proposal for the financial rescue of Rothwells, including a number of elements among which was the provision by the State of an indemnity to support the credit line facility which it was proposed the National Australia Bank Limited should provide to Rothwells. In my opinion the objections raised against them by Wardley and Wardley Securities are not made out.

11. Paragraph 19 is attacked for the plea that "Bond also acted as spokesman for Connell, Beckwith, Yonge and other officers of Rothwells, Bond Corporation, Wardleys and Wardleys Securities then present". This is said to have been a conclusion about the relationship between Bond and other persons present at the meeting not supported by any material facts. Criticism was also made of the allegation that his remarks were made "without dissent and with the tacit support of all those persons present". The applicant says that the plea that these remarks were made without dissent and with tacit support were material facts supporting the contention that he acted as spokesman.

12. Paragraph 19 is relied upon although not expressly in paras.51 and 52 which characterise the statements and representations "made by or on behalf of or endorsed by" the four corporate respondents as misleading or deceptive conduct. The reference to "endorsed by" picks up the conduct pleaded in para 19 which, in each case, is said to have been an endorsement of Bond's statement by persons representing the corporate respondents at the Saturday meeting. Connell and Yonge is each said to have been involved in the misleading or deceptive conduct by reason, inter alia, of his "presence and participation in the Saturday meeting" as pleaded in para 19. The effect of the pleading is that endorsement of misleading or deceptive conduct itself constituted such conduct or involvement therein. This is arguable and does not depend for its viability on concepts of agency or vicarious liability, but rather on the conduct of the parties in relation to the conduct of one who was said to have made the relevant statements.

13. The plea that Bond "acted as spokesman" conveys some additional conduct on his part. It may be that this derived from the subject matter and context of what he said. Particulars may be appropriate, but additional material facts to support it are not necessary. The fact that he acted as spokesman, together with the absence of any dissent on the part of the others present may arguably support a contention that they thereby endorsed what he said. The absence of dissent is a plea of silence. It is not clear what is added to that by the concept of "tacit support". If that is meant to invoke additional material facts, it is embarrassing for it does not properly disclose them. I think it should be struck out. On these objections therefore the words "with the tacit support of all those persons present" appearing in para 19 should be struck out. This conclusion also applies to paras 21 and 22 which deal with statements made by Connell and paras 31 and 34 relating to statements by Yonge. Otherwise, the objections to these paragraphs are not sustained.
Wardley - Paragraphs 26 and 27

14. Following the Saturday meeting it is said that those persons present as representatives of the State namely David Parker, then Minister for Minerals and Energy, John Horgan, then Chairman of the Western Australian Development Corporation and Anthony Lloyd, then a Senior Government Adviser, visited the Premier, Brian Burke, and told him of what had been said. Burke, it is said, then requested that they arrange to make further inquiries as to the state of the Rothwells' loan book and to insist that representatives of the State be given access to Rothwells' available financial records in an attempt to determine the state of the loan book (para 26). And on the morning of Sunday, 25 October, Parker and Lloyd, together with Edwards, then Secretary of the Department of Premier and Cabinet and Norman Taylor, a Ministerial Adviser, allegedly attended at Rothwells' Perth office and requested further information concerning the state of its loan book. The statement of claim alleges that they were provided with computer printouts containing some incomplete details of borrowings from Rothwells. Edwards and Lloyd carried out an examination of these secondary materials.

15. These paragraphs are said to plead evidence and not material facts. The applicant contends that the plea is relevant to support the contention that it was the State which relied upon and was induced by the representations alleged when it executed the indemnity in favour of the National Australia Bank. In my opinion, however, neither of these paragraphs discloses any material fact beyond that set out in the first sentence of para 26. The communication to Burke of what had been said at the Saturday meeting is material, as it was he who is said to have signed the indemnity. Paragraph 27 and all but the first sentence of para 26 should be struck out.
Wardley - Paragraph 30

16. In para 30 it is alleged that at a meeting held on Sunday, 25 October 1987 with members of the State Government Budget Sub-committee, Peter George Beckwith, the Managing Director of Bond Corporation, "repeated the substance of the statements made by Bond, Yonge and Connell at the Saturday meeting as set out in paras.15, 16, 18, 20 and 22". Objection is taken to the term "substance" This, it is said, means "the essential part of" the statements and leaves the respondents to assess what they consider to be those essential elements. There is said therefore to be a failure to plead material facts. The applicant submits, however, that the word "substance" is here used in the sense of "generally" and "apart from detail" and in context means "to the same effect albeit not in identical words". I am satisfied that in context the meaning is clear enough and that the respondents can plead to para 30. The objection to para 30 is not sustained.
Wardley - Paragraph 33

17. This paragraph alleges that during the Budget Sub-committee meeting, Yonge claimed to be an expert financial and banking consultant. That element of the plea is not objected to as it goes to the cause of action in negligence. The balance of the paragraph refers to him rejecting concerns expressed by Attorney-General Berinson about the possible existence of risk implicit in the requirement for a State indemnity and asserting that the proposals were sound and sensible and based on good banking practice. The objection is taken that the balance of the paragraph is evidence and in any event embarrassing because the proposals referred to are not defined. I accept the applicant's submission, however, that the pleaded statements are relied upon in para 42 to support an implied representation that the indemnity would not be called upon. I also accept that the reference to the proposals is a reference to the scheme allegedly explained by Bond as set out in para 16. The position could be clarified by specific cross-reference to para l6 in para 33. But para 33 should not be struck out on the basis of the objections taken by Wardley and Wardley Securities.
Wardley - Paragraph 38

18. Here it is pleaded that the statements by Bond and Beckwith pleaded in paras 18 and 30 each or alternatively in combination, constituted an implied representation by Bond Corporation that Rothwells was a sound financial institution which had substantial net assets. And by virtue of the matters set out in paras.19 and 31 and further or alternatively, paras 24 and 37, such implied representations were also made by Connell, Rothwells, Wardley, Wardley Securities and Yonge.

19. The criticism is first made that the facts upon which the implied representation is based includes an express representation to the same effect (as set out in para 18(d)). Further, it is pointed out that this paragraph relies upon paras 24 and 37 in support of implied representations attributed, inter alia, to Wardley and Wardley Securities. But paras 24 and 37 refer to the state of knowledge of representatives of the State and Connell's awareness of their knowledge of certain facts (para 24) as well as Connell's silence and failure to suggest that statements made by Bond, Yonge and Beckwith at the Budget Sub-committee meeting were inaccurate or incomplete (para 37). Neither of these paragraphs would support an implied representation on the part of Wardley or Wardley Securities. That is apparent from a reading of them. It does not render the paragraph objectionable.

20. As to the invocation of para 18, I agree that the inclusion of an express representation in a series of facts pleaded to support an implied representation to the same effect obscures the basis upon which the implication is advanced. So much of para 38 as invokes para 18(d) should be struck out by inclusion of the words "(save for the statement referred to in para 18(d))" after the reference to para 18.
Wardley - Paragraph 39

21. The criticism of this paragraph is similar to that made of para 38. To the extent that the implied representation pleaded relies upon an express representation to like effect in para 18(e), the plea is bad. Otherwise the paragraph can stand. Therefore, so much of para 39 as invokes para 18(e) should be struck out by insertion of the words "(save for the statement referred to in para 18(e))" after the reference to para 18.
Wardley - Paragraph 41

22. This again raises an implied representation based upon on statements by Yonge pleaded in paras.20 and 32. Paragraph 20(d) contains an express representation to the same effect. So much of para 41 as invokes para 20(d) should be struck out by the insertion of the words "(save for the statement referred to in para 20(d))" after the reference to para 20.
Wardley - Paragraph 42

23. Again the same point is made with respect to this paragraph as with respect to 39 and 41. It pleads an implied representation by Yonge that the State guarantee or indemnity would not be called on. It relies, inter alia, upon an express representation to like effect in para 32(d). So much of para 42 as invokes para 32(d) should be struck out by insertion of the words "(save for the statement referred to in para 32(d))" after the reference to para 32.
Wardley - Paragraph 43

24. This pleads an implied representation by Connell and Rothwells that the Rothwells' 1987 accounts were a true and fair portrayal of Rothwells' financial state as at 31 July 1987 and specifically as to its shareholders' funds, bad and doubtful debt provision and pre-tax profits for the year. By virtue of paras.21 and 34 the implied representation is attributed to Bond Corporation, Wardley, Wardley Securities and Yonge. Paragraphs 21 and 34 plead statements made by Yonge and endorsed by others. The applicant says that this sentence simply repeats for the sake of clarity that statements attributed to Connell have also been attributed to Wardley and Wardley Securities. The worst that can be said of the sentence is that it is unnecessary. The objection to para 43 therefore fails.
Wardley - Paragraph 44

25. The objection taken to this paragraph by Wardley and Wardley Securities is similar to that taken to para 43 and fails for the same reason.
Wardley - Paragraph 45

26. Further implied representations attributed to each of the respondents are set up in para 45 and are said to have been made to both the State representatives and the Budget Sub-committee (i.e. at the Saturday and Sunday meetings respectively). The implied representations alleged are:

(a) that the financial and accounting records and materials which
the respondents had examined or investigated were accurate and
reliable, or alternatively sufficient, to justify the
statements, representations and predictions which were made
concerning the position and prospects of Rothwells;
(b) that Wardley, Wardley Securities and Yonge had had sufficient
opportunity to investigate and examine the financial position of
Rothwells in order to make the statements and representations
referred to in paras.20, 32 and 33 above;
(c) that it was practicable for a decision to be taken as to whether
the State should grant the NAB indemnity as requested on the
material then available before 26 October 1987;
(d) that it was inappropriate to move to have Rothwells placed in
liquidation or for a receiver or interim receiver to be appointed.

The facts relied upon to ground these implied representations are the representations pleaded in paras. 18, 20, 22, 32 and 35, the conduct of each of the respondents is making those statements and in participating in the request for the indemnity to be granted by the State.

27. There is said to be no plea of any participation in the request by Wardley and Wardley Securities. The applicant, however, submitted that the allegation of participation did not introduce any additional facts but relied upon the role of each of the respondents in the making of the various identified representations. The paragraph does suggest additional factual matters and its true intent should be made clear perhaps by the insertion of the word "thereby" before "participating". The second point made is that some of the statements relied upon individually do not support the pleaded implications. That is a matter of argument in the context of the evidence and I am not prepared to strike out the paragraph on that basis. The implied representation that the financial records would justify the statements made about Rothwells was attacked as unnecessary and irrelevant. Again, that is a matter on which argument may proceed in the context of evidence. The use of specific words such as "practicable" and "inappropriate" is also said to be meaningless. If this is so then, no doubt, it may be said that the representations were not in any relevant sentence misleading or deceptive. It is not a strike out point. The objection to para 45 is not sustained.
Wardley - Paragraphs 46, 48 and 49

28. Paragraph 46 pleads a number of facts which were not known to representatives of the State at the Saturday meeting or members of the Budget Sub-committee at any time before the State granted the NAB indemnity. These were matters that bore upon the true financial position of Rothwells and are said in para 48 of the consolidated statement of claim to have been "material to the consideration by representatives of the State and the members of the Budget Sub-Committee of the request for the State to grant the NAB indemnity". Paragraph 47 pleads the failure of Connell, Yonge, Bond, Beckwith or any other officer of Wardley, Wardley Securities or Bond Corporation to disclose various of the matters referred to in para 46. According to para 48 the failure of each of the respondents to disclose these matters constituted an implied representation by that respondent to the representatives of the State and the members of the Budget Sub-committee that no such matter or circumstance existed or that nothing to that effect or of that nature had occurred. Paragraph 49 sets up a further and alternative plea that in the circumstances of the Saturday meeting and the Budget Sub-committee meeting, Connell, Beckwith and Bond Corporation, Wardley, Wardley Securities and Yonge was each under a duty to disclose the matters referred to in para 46 which were known to him in order to provide a true and fair account of the position of Rothwells and to put the statements and representations which each had made in a proper and accurate context.

29. Various criticisms are advanced of these paragraphs. It was said that there is no separate plea that Wardley represented that all material matters had been disclosed which could be falsified by the matters pleaded in paras.46, 48 and 49. Those matters were therefore said to be irrelevant and to disclose no cause of action. Reference was made in this respect to Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. Arguments about the circumstances in which silence may give rise to implied representations or misleading or deceptive conduct which may arise out of this pleading are best determined in the context of the evidence and at trial. I am not satisfied that the criticisms advanced of these paragraphs warrant their being struck out. Specific criticisms are made of the wording of sub-para 46(c) and 46(d). Sub-paragraph 46(c) refers to a telephone call from Lucas, then Managing Director of Rothwells, to Connell at Yonge's office in Sydney and his suggestion to Connell that Rothwells should close its doors, which suggestion was not acted upon because at the time Connell was about to visit the Chief Executive of the NAB in Melbourne. The paragraph alleges that Yonge, Wardley and Wardley Securities knew of the call from Yonge's presence at that incident. The complaint is made that there is no plea that Yonge was told of the content of the call by Connell after the telephone conversation had finished. That is a matter of evidence and I am not satisfied that it is necessary to the plea given the allegation that Yonge was present at the time.

30. As to para 46(d) the allegation that after certain events Yonge "agreed to support the rescue" is criticised on the basis that there are insufficient material facts pleaded to establish when he so agreed or how the agreement fitted into the rescue package and its chronology. The support is said to be a vague and embarrassing term. In my opinion, none of these criticisms would warrant striking out the paragraph.
Wardley - Paragraph 50

31. Here it is alleged that the statements and representations of the respondents at the two meetings each and alternatively in combination constituted implied representations that the respondents and each of them had disclosed all facts and circumstances material to a consideration by the State of the request to grant the NAB indemnity. It is criticised on the basis that various of the individual statements alleged could not give rise to the implication. One such statement was that Bond Corporation was not charging or receiving any fee in connection with its role in the rescue. It is difficult to see how that individual representation or indeed a number of the individual representations alleged in the various paragraphs mentioned in para 50 could singly support an implied representation that the respondents had made full disclosure. No doubt it could be said that such an implication is arguable based upon the subject matter of the meetings, the fact that representations were made about the financial affairs of Rothwells relevant to the indemnity request and to some extent the content of the representations. But to require the respondents to face a case of an implied representation of full disclosure on this constellation of individual representations is to cast the net of potential argument so widely that they have no real way of knowing the basis upon which the implication will be made. In my opinion, para 50 is for that reason embarrassing and should be struck out subject to leave to amend.
Wardley - Paragraph 52

32. This paragraph seeks to characterise each of various specified statements and representations made by or on behalf of or endorsed by the corporate respondents as a representation with respect to a future matter made without reasonable grounds and thereby misleading by virtue of s.51A of the Trade Practices Act 1974. Complaint is made that the statements in paras 20(g) and 32(g) which are referred to here are not the representations with respect to future matters. In my opinion the objection is without substance. Both of the sub-paragraphs referred to have predictive elements.
Wardley - Paragraph 53

33. This refers to the alleged failure of the respondents to disclose various matters referred to in para 46 and characterises that failure as misleading or deceptive conduct. Despite reference to dicta which may support a contrary view, the question of the extent to which the pleading can be supported at law is, in my opinion, not to be determined on a strike out application but in the context of all the evidence.
Wardley - Paragraphs 56 and 57

34. A complaint is made here about the degree of overlap between paras 56 and 57. At worst, some of the pleading in 57 may for that reason be unnecessary but does not warrant a strike out order.
Wardley - Paragraph 59

35. This paragraph alleges that various specified statements and representations made by or on behalf of Wardley, Wardley Securities and Yonge or endorsed by them and the implied representations alleged earlier, were made negligently. Particulars of negligence based upon alleged failures by Wardley, Wardley Securities and Yonge to properly investigate and assess the financial state of Rothwells and to give appropriate advice follow. The complaint made of this paragraph is that it lacks an essential plea of negligent mis-statement, namely a statement that the representations referred to are false. In answer to this contention the applicant has set out in its submissions a table showing paragraphs in which representations are identified and other paragraphs of the consolidated statement of claim in which they have been falsified. Some of the falsifying pleas relied upon are taken from para 60 which relates only to statements "made by or on behalf of Connell or endorsed by him". Falsifying pleas of wider application are found in paras. 63, 64 and 65 and these too are relied upon. They are not specifically related back to the negligence plea.

36. In my opinion these respondents are entitled to a clearer indication of the basis upon which each of their allegedly negligent statements is said to have been false, if only by reference in the pleading to the sub-paragraph in which that statement is falsified. The negligence claim as it stands is inadequately pleaded and para 59 will be struck out with leave to amend and replead.
Wardley - Paragraphs 63 and 64

37. Paragraph 63 makes a number of allegations about what was a true and fair view of Rothwells' financial state on 31 July 1987 by reference to such factors as deficiencies in each shareholders' funds, the level of its deposits and receivables, a proper provision for bad and doubtful debts and the extent to which Connell related entities owed it money and the amount of its pre-tax loss. The reason for this paragraph is said to be uncertain. In some cases it is pointed out the pleas falsify earlier representations, but in other cases establish their truth. Thus para 63(b) asserts that as at 31 July 1987 Rothwells had deposits of $608,786,057. The level of deposits set out in the financial statements as at 31 July 1987 was the same (para 17(b)). The applicant submits that the plea shows the complete picture and not only those figures which were inaccurate. I am not satisfied that this approach is embarrassing and would not allow this objection against para 63. Paragraph 64 raises a similar issue in relation to the state of Rothwells' finances as at 24 October 1987. Similarly in my opinion, the objection to that paragraph fails.
Wardley - Paragraph 65

38. Sub-paragraphs 65(f), (i) and (j) are impugned as mere comment and thereby embarrassing. These are said by the State however to falsify representations pleaded in paras 30(d), 45(d) and 45(c) respectively. Whilst there may be some room for argument about the extent to which a pleaded opinion can falsify a represented opinion for the purposes of misleading or deceptive conduct, I am not satisfied that this matter ought to be dealt with on a strike out motion and will allow the paragraph to stand.
Wardley - Paragraph 74

39. This paragraph, in effect, lays the foundation for the plea in para 75 that the State made a reasonable settlement of a dispute with the NAB as to its liability under the indemnity by paying $33 million to the provisional liquidators of Rothwells and receiving $10.5 million subsequently from the NAB. Paragraph 74 pleads factual bases for the contention that there was a risk that the State might be exposed to liability under the indemnity. It is submitted that the State must plead that there was in fact a preference in favour of the National Bank and that the National Bank was entitled to sue under the indemnity. This criticism really canvasses an issue that was dealt with in my earlier judgment and I do not propose to allow the objection.
Wardley - Paragraphs 10 to 55

40. A global objection is taken to that part of the statement of claim based upon alleged contraventions by Wardley and Wardley Securities of the Trade Practices Act. The point is made that a plea of misleading or deceptive conduct requires an allegation that there were representations which were false. The complaint is made that in the trade practices case as pleaded there is no allegation of falsity at all. Paragraph 51 says that representations which were made were misleading or deceptive, but does not say that they were false. In answer to this complaint, the applicant relies upon the table in its submission indicating the way in which various representations are said to have been falsified. Again, I am of the opinion that there is some room for confusion about the application of para 60 and other aspects of the falsifying plea to this cause of action. As with the negligence claim, the respondents are entitled to a clear indication of the way in which each of the various representations referred to in para 51 is said to be misleading or deceptive. I am not satisfied that it is made clear at the present time particularly having regard to the limitation of para 60 to statements attributed to Connell. In my opinion para 51 should be struck out.
Yonge Objections
General Issues

41. The first submission on behalf of Yonge put on record his objection that the Trade Practices Act claims against him were raised outside the time limited by s.82(2) of the Trade Practices Act 1974. It was conceded that the objection could not succeed at this stage having regard to the decision of the Full Court in State of Western Australia v Bond Corporation Holdings Ltd (1991) 30 FCR 245. It might, however, be taken up again depending on the outcome of the High Court consideration of that decision. I should add that it is a matter which can be pleaded in the defence whether or not the High Court has delivered its decision at the time the defence is filed.

42. Another general point taken by Yonge alleges that there is no pleading of damage sufficient at law to give rise to a cause of action. This is in part the same point as was raised by Wardley and Wardley Securities in respect of para 74 and to that extent is dealt with in substance in my earlier judgment.

43. The submission is also made by Yonge, and more elaborately on behalf of Connell, that no loss can be claimed by the State because the execution of the indemnity and the payment of moneys to the NAB under the settlement made in May 1989 are not alleged to have been done under statutory authority. It was contended that every contract or arrangement involving liability for expenditure of public money must be approved specifically by the legislature and that there are strict limits upon the extent to which a minister or public servant in the absence of such authority can bind the Crown. But New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455 is authority for the proposition that the Crown has a power independent of statute to make such contracts for the public service as are incidental to the ordinary and well recognised functions of government, 496 (Rich J.), 508 (Dixon J., Gavan Duffy C.J. agreeing). And Starke J., adopted the somewhat broader position at 502-503:

"The question of authority, in the case of contracts
providing for the carrying on of the ordinary
activities or functions of government, presents, as a
rule, but little difficulty; other contracts, however,
must be considered each in relation to its own facts."

In that case Dixon J. attached some significance to the involvement of the Premier of New South Wales as head of the department whose officer had the task of making the advertising contracts which were in issue. As head of its administration the Premier "must be assumed to speak with the authority of the Government" (507). Any payment due under the contract was subject to the provision by Parliament of sufficient moneys for its performance but the contract could be sued on whether or not such moneys had been appropriated.

44. Reference was made by counsel for Connell to some earlier cases, which it is not necessary to review for present purposes. Munday and Shreeve v State of Western Australia and Anor (1962) WAR 65 was cited for the distinction it drew between "governmental arrangements" on the one hand and legally binding contractual agreements on the other. But that distinction is not relevant here. Meates v Attorney General (NZ) (1979) 1 NZLR 415 was also mentioned. In that case at 462, Davidson C.J. stated that:

"There are two requirements for the validity of contracts made or
purporting to be made by a Government representing the Crown.
First, the contract must be within the power of the particular
Government; and, second, the contract must have been made by a
servant or agent acting within the scope of his authority."

His Honour did not doubt that the Crown has authority to enter into the kind of contracts there alleged but added:

"...liability under a contract involving the expenditure of money
cannot be discharged by a Government unless Parliament has
appropriated money for the purpose."

In my opinion, the issue of the authority of the Premier and/or the Crown to execute the indemnity and pay money under the settlement with the NAB can be raised by way of defence and determined upon the evidence and the proper characterisation of the transactions in issue. It is not a matter which is amenable to disposition on a strike out motion. Even if the payment made under the settlement between the State and the NAB were found to have been without parliamentary authority, that will not necessarily conclude the question whether it constitutes an element of loss flowing from the conduct attributed to the various respondents. The general objection based upon want of constitutional authority fails.

45. It is now necessary to consider objections to specific paragraphs taken by Yonge which were not covered by the Wardley objections.
Yonge - Paragraph 9

46. Here it is alleged that Yonge acted as a director of both Wardley and Wardley Securities. There is nothing objectionable about that plea nor the allegation that he was knowingly concerned in "all the conduct of Wardley and Wardley Securities hereafter set out".
Yonge - Paragraph 10

47. In para 10 it is alleged that the statements made to representatives of the State and the Budget Sub-committee by the corporate respondents were in trade or commerce. The objection to the paragraph is somewhat obscure. In any event no strike out point is made.
Yonge - Paragraph 17

48. This pleads the financial accounts of Rothwells for the year ended 31 July 1987. It is submitted that the absence of a plea that the accounts were known to Rothwells is embarrassing. The reference to the existence of a "financial interest" on the part of Connell in relation to entities and the alleged non-disclosure of "significant loans" to them from Rothwells was also attacked as embarrassing. In my view the reference to "significant loans" embodies a normative qualification and is embarrassing. It gives the respondent wishing to plead in defence no idea of the State's notion of the threshold at which a loan may be treated as significant. The last sentence of para 17 should therefore be struck out.
Yonge - Paragraph 20

49. In para 20 it is said that at the Saturday meeting, Yonge, by reference to a whiteboard, "confirmed the statements made by Bond set out in sub-paragraphs 18(a), (b) and (c)". Notwithstanding Yonge's objection, the word "confirm" raises an allegation of material fact to which he can plead although he may, by request for particulars, seek elaboration if that is considered necessary.
Yonge - Paragraph 29

50. By this paragraph it is alleged that prior to the Budget Sub-committee meeting, Parker advised the State Attorney-General, Berinson, of statements made by Bond, Yonge and Connell and of the circumstances in which they were made. This is a perfectly intelligible plea. It raises a connection between what was said at the Saturday meeting and Berinson's state of knowledge at the Budget Sub-committee meeting on Sunday. The paragraph can stand.
Yonge - Paragraphs 31 and 34

51. Objection is taken to the allegations that Beckwith and Yonge respectively acted as spokesmen for others present at the Budget Sub-committee meeting and the allegation that they received their tacit support. For reasons expressed on the same point elsewhere the words "and with the tacit support of Connell and Yonge" in para 31 and "and with tacit support of Beckwith and Connell" in para 34 should be struck out. Otherwise the objections to these paragraphs fail.
Yonge - Paragraph 47

52. Yonge objected to para 46 on the same grounds as Wardley and Wardley Securities. His objection to para 47 is consequential upon the points made in relation to para 46 and therefore fails.
Yonge - Paragraph 55

53. In this paragraph it is alleged that Yonge was knowingly concerned in the conduct of each of Bond Corporation and Rothwells by reason of his presence at and participation in the two meetings and his failure to disclose various of the matters pleaded in para 47. The plea does not specify the conduct of the two companies in which he was involved. As it presently stands, it is embarrassing. Paragraph 55 will therefore be struck out.
Yonge - Paragraph 75

54. The objection to this paragraph is an element of the general objection based upon the alleged failure to properly plead loss. The paragraph can stand.
Connell Objections

55. By his amended motion filed on 2 December 1991, Connell moves for an order that the application and statement of claim be struck as disclosing "no reasonable or probable cause of action" on four grounds relating to the want of proper authority for the execution of the indemnity and payment of money under the settlement between the State and the NAB. For reasons already outlined in relation to substantially the same point taken on behalf of Yonge, this aspect of the objection to the pleading fails.

56. The general objection was also taken by Connell that the consolidated statement of claim goes beyond pleading material facts and thus raises false issues by virtue of its inclusion of matters of history, argument, particulars, evidence and matters passing between third parties. The extent of this objectionable pleading is said to be so wide- spread that it cannot conveniently be excised from the statement of claim which should be struck out as a whole. In support of that proposition, reference was made to Coe v The Commonwealth [1979] HCA 68; (1979) 53 ALJR 403 at 409 (Jacobs J.) and Trade Practices Commission v Australian Iron and Steel (1989) 22 FCR 305 at 323 (Lockhart J.). In the latter case, Lockhart J. struck out a statement of claim in which the defective parts were "so inextricably intertwined with offending material that an oppressive burden (was) cast upon the respondents to spell out the alleged cause or causes of action". While I accept that there are matters pleaded, some of which have been referred to earlier in these reasons, which are not strictly necessary, I would not on that basis strike out the pleading as a whole. Orders will be made in respect of certain paragraphs some of which have already been dealt with. Counsel for Connell specifically mentioned paras.12 to 15, 17, 26-29, 46-48, 62, 63, 64, 70 to 72 and 75 under this heading.
Connell - Paragraphs 12 to 15

57. Paragraphs 12 to 15 set up Connell's request to Burke for a meeting with a representative of the State on 24 October and the identities of those who attended the meeting. Those present are further identified as officers of Rothwells, Bond Corporation, Wardley and Wardley Securities. This plea is linked to the alleged endorsement by those present of statements made by Bond as spokesman for them and from which it was said they did not dissent. The reference to their alleged "tacit support" of statements made at the meetings are unable to stand. And for reasons set out later, the reference to other officers of Rothwells, Bond Corporation and Wardleys cannot stand.
Connell - Paragraph 17

58. Paragraph 17, subject to the excision of the last sentence which should be repleaded, can also stand. The paragraph otherwise makes the 1987 financial accounts an element of the statements made by Bond and pleaded in para 18 and therefore one of the facts upon which the implied representations as to Rothwells' soundness pleaded in para 38 is based.
Connell - Paragraphs 26 to 29

59. Paragraphs 26 to 29 are attacked. For reasons already given in relation to the like objections raised by Wardley and Wardley Securities, para 27 and all but the first sentence of para 26 should be struck out. Paragraph 28 alleges that the meeting of the Budget Sub-committee was held on the afternoon of 25 October 1987 "to determine whether the State should provide a guarantee or indemnity to NAB in relation to the proposed grant by NAB of a credit line facility to Rothwells of an amount of $150 million". It then sets up the persons who were present at the meeting. The reference to the purpose of the meeting is unnecessary and embarrassing and should be struck out. Otherwise para 28 can stand. And as I have already held on Yonge's objection to para 29 that too can stand.
Connell - Paragraphs 46 - 48

60. These paragraphs can stand for the reasons already given in relation to the objections raised against them by Wardley and Wardley Securities.
Connell - Paragraph 62

61. This paragraph pleads that induced by and acting in reliance upon each of the matters referred to in paras. 47, 49, 51, 52, 59 and 60, the State entered into the indemnity with NAB. This element of the pleading is not objectionable. The last sentence which deals with the manner and time of its delivery to NAB is unnecessary and should be struck out.
Connell - Paragraphs 63 and 64

62. These paragraphs can stand for the reasons enunciated in relation to the Wardley objections.
Connell - Paragraphs 70 - 72

63. Paragraph 70 pleads the presentation of a petition for the winding up of Rothwells on 3 November 1988 and the making of a winding up order on 22 September 1989. Paragraph 71 pleads the assertion by the provisional liquidator that Rothwells payment of $150 million to NAB was a preference and para 72 alleges that NAB made a request to the State to indemnify it in respect of the provisional liquidator's demand. The facts pleaded in these paragraphs are material to the existence of a dispute which led to the settlement that forms the basis of the State's claim to have suffered loss. In my opinion they all plead matters of material fact and can stand.
Connell - Paragraph 75

64. Paragraph 75 pleads the settlement of the dispute. It is a material fact relevant to the loss claimed by the State and can stand.
Incorporation of Paragraphs by Reference

65. Counsel for Connell also criticised the extensive incorporation in some paragraphs of paragraphs appearing elsewhere in the pleading. This, it was submitted, is oppressive and embarrassing especially in respect of paras 51, 52, 57, 60 and 62 in which the use of such incorporation by reference was said to amount to an abuse of process. Paragraphs 51 and 52 characterise statements and representations referred to in earlier parts of the pleading as misleading or deceptive conduct (para 51) or as representations with respect to future matters made without reasonable grounds and deemed misleading by virtue of s.51A of the Trade Practices Act 1974. Although the characterisations so alleged cover many pleaded representations they are not for that reason oppressive. The same is true of those referred to in para 57 which deals, inter alia, with the state of knowledge of each of the respondents at the time the statements were made.

66. Paragraph 60 sets out a number of statements or representations "made by, or on behalf of, Connell or endorsed by him" by stating their effect and the earlier paragraphs of the statement of claim in which they can be found. It alleges that they were "false and fraudulent" and that Connell knew them to be so or made them recklessly not caring if they were true or false. Additionally it is said his failure to disclose certain matters referred to in para 47 was "fraudulent in the light of the duty by Connell to disclose those matters as alleged in paragraph 49". Alternatively, his failure to make disclosure as alleged in para 66 is said to have been fraudulent "in the light of the matters therein pleaded".

67. The question whether the fraudulent non-disclosure alleged can amount to actionable deceit apart, the use of references to statements or conduct set out in other paragraphs of the pleading is not in itself objectionable. Paragraph 60 primarily sets out the terms of the representations relied upon to support the allegations of fraud and in addition cross-refers to those paragraphs in which such representations appear. While there is some complexity in the pleading, it is not, in my opinion, oppressive for that reason. As will appear later, however, that is not the end of the consideration of para 60.
Inclusion of More than One Matter in Each Paragraph

68. It was submitted that another objectionable practice used in the statement of claim was to incorporate two or more separate matters of fact in the one paragraph in breach of O.11 r. 1(b). I accept that this occurs throughout the statement of claim, but do not consider that it gives rise to any unfair prejudice to the respondents.
Implied Representations

69. Complaint was also made of the pleading of various implied representations referring to statements by various actors and saying that "each, alternatively in combination constituted an implied representation that...". I have already dealt with objections taken to the pleading of some implied representations. Counsel for Connell contended that where a single express statement is said to include an implied representation the express and the implied representation must be pleaded or identified separately. Where an implied representation arises out of a collection or grouping of express statements, each implied representation and the collection of statements out of which it is derived must be pleaded or identified on a representation by representation basis.

70. Subject to the comments made earlier, I am satisfied that the implied representations pleaded and the bases for the implications are adequately identified and that there is no ground for striking them out. I should add that I understand the phrase "alternatively in combination" to refer only to the combined effect of all the statements identified. Thus, in each case the implication is supported by reference to each particular statement relied upon taken by itself and in conjunction with all the other statements pleaded.
Separate Pleading of Deceit

71. It was then said that because the case as pleaded against Connell is so convoluted, complicated, repetitive and prolix a direction should be given that causes of action in deceit and under the Trade Practices Act be pleaded in separate parts of the statement of claim or even in separate statements of claim. Given the close relationship of the two claims, I do not accept that their joinder in the statement of claim is inappropriate nor that it requires a specific direction. This submission is not accepted.
The Pleading of the Fraud Claims Against Connell

72. The pleading of fraud against Connell was attacked as embarrassing and prejudicial by reason of the rolled up way in which the various allegations are made. Paragraph 60 which is central to this claim opens with the words that:

"Each of the statements or representations made by, or
on behalf of, Connell or endorsed by him, to the
following effect..."

As noted earlier, the paragraph then sets out the various representations relied upon, cross-refers to paragraphs in which they are specifically pleaded, and then goes on:

"... was false or fraudulent. At the time each of the
above statements or representations was made Connell
knew it to be false and untrue or made or endorsed
each such statement or representation recklessly not
caring if it were true or false."

It was submitted that Connell is entitled to have pleaded against him which of the representations was made by him expressly, which by his agents and which he made by conduct. I am satisfied, however, that the various modes in which the representations were made by or on behalf of him or endorsed by him are adequately referred to in the previous paragraphs of the pleading which are themselves identified in para 60. This aspect of the objection to the fraud claim therefore fails.

73. The point was also advanced that implied representations cannot form a basis for a claim in fraud. I am not satisfied that that proposition is so unarguable as to support a strike out order.

74. There are statements among those relied upon in para 60 that are statements of opinion or prediction which are not falsified by reference to Connell's state of mind or his knowledge of the non-existence of any basis for the opinion or prediction made or endorsed by him. Falsification by reference to a contrary view is insufficient for that purpose. In this respect the pleas made in sub-paragraphs 60(d), (g), (i), (j) and (l) cannot stand. In addition, the closing sentences of para 60 allege that Connell has committed fraudulent non-disclosure of various matters. Absent the attribution of some positive and fraudulent mis-statement arising from the alleged non-disclosures, this part of para 60 also fails to support any claim in deceit and must be struck out. I conclude therefore that sub-paras. 60(d), (g), (i), (j) and (l) together with the last two sentences of the paragraph should be struck out.

75. A number of other complaints were made about the pleading in para 60 which I do not accept and need not canvass further here. Objection was also taken to paras 63, 64 and 65 which I have already discussed in connection with the Wardley objections. In my opinion there is no basis for striking out these paragraphs.
Agency or Authority

76. Counsel for Connell also complained of the plea in para 4 that "insofar as is material hereto (he) acted within his authority as director and chairman of the board of directors of Rothwells". I do not accept that this plea is embarrassing. The question of materiality may be determined by reference to Connell's conduct pleaded later in the statement of claim. And the plea does not exclude characterisation of his conduct as personal as well as representative. Nor is it necessary to specifically include these allegations in a paragraph relating to Rothwells as part of the case against that company. As pleaded, the allegation is part of the case against that company. And I do not accept that the plea in para 4 that Connell was "directly knowingly concerned in all the conduct of Rothwells hereafter set out" is embarrassing. The conduct is identified.
Other Officers of Rothwells

77. There is in para 14 a plea that in addition to Connell there were present at the Saturday meeting "other officers of Rothwells" including various named persons. This plea was said to be embarrassing because there is no reliance placed upon the actions or inaction of these officers in the statement of claim. They are referred to by inclusion in the allegation in para 19 that each of those present endorsed the statements made by Bond. See also paras 21 and 22. The plea no doubt can be related to the allegation in paras 51 and 52 that each of the statements or representations made by or on behalf of or endorsed by, inter alia, Rothwells was misleading or deceptive conduct on its part. But the way in which that conclusion is reached is not adequately exposed. It is not suggested that each of the other officers of Rothwells had the power to bind the company by his endorsement nor that his endorsement would be somehow attributable to the company. In my opinion, the objection is made out and applies equally to the pleadings relating to other officers of Bond and Wardleys. All of para 14 after the words "and Yonge" should be struck out. Some changes may be necessary in other paragraphs as a result but these can be picked up in consequential amendments for which leave will be given.
"A Person of Such Prominence" - Paragraphs 25 and 37

78. Paragraphs 25 and 37 allege, inter alia, that Connell "was a person of such prominence for Rothwells" that he knew or ought to have known that he was expected by the representatives of the State at the Saturday meeting (para 25) and the Budget Sub-committee at the Sunday meeting (para 37) to provide any further information concerning the affairs of Rothwells that was material to statements made by Bond, Yonge and Beckwith at those meetings. I accept the complaint that his designation as "a person of such prominence" is embarrassingly vague. Presumably it refers to the offices he held in the company. If that be so, it can be pleaded. In para 25 the words "was a person of such prominence for Rothwells that, as he" will be struck out and the words in para 37 "he was a person of such prominence that" will be struck out.
"Acted as Spokesman" - Paragraphs 19, 21, 31 and 34

79. The objection to this plea has already been dealt with in relation to the Wardleys' motion.
Endorsed, Adopted, Tacit Support - Paragraphs 19, 21, 22, 25, 31, 34, 43 and 44

80. The objection to the allegation that people endorsed, adopted and endorsed and gave statements "their tacit support" have already been dealt with in relation to the Wardleys' motion.
"Should have Known" - Paragraphs 24(c), 25, 36(c) and (d), 37 and 57

81. There are allegations in each of these paragraphs that Connell or others "should have known" or "should have been aware" of certain things. The submission was made that constructive knowledge does not support a common law action in deceit nor the statutory action for misleading or deceptive conduct. It is necessary in this respect to deal with each of these paragraphs:

(i) Paragraph 24(c) alleges that at the time of the Saturday
meeting the representatives of the State who attended knew, and Connell
appreciated that they knew:
"(c) That Connell was aware, or should have been
aware, of the financial position of Rothwells."
A contention that representatives of the State believed that Connell was
aware of the financial state of Rothwells would be material to reliance
or inducement. The contention that they knew he should have been aware
is not. The paragraph raises a false issue. The words "or should have
been aware" in para 24(c) must be struck out.
(ii) Paragraph 25 alleges, inter alia, that Connell should have
known he was expected to provide certain information to the State. The
plea is not material to any duty to disclose, nor to knowing involvement
in the conduct of Rothwells. Constructive knowledge has no role to play
in this setting. The plea is embarrassing. The words "or should have
known" appearing in para 25 will be struck out.
(iii) For the same reasons as relate to para 24(c) the words "or
should have been aware" will be struck out of para 36(c).
(iv) For the same reasons as relate to para 25 the words "or should
have known" will be struck out of para 37.
(v) Paragraph 57 alleges that at the time each of the statements or
representations was made the respondents knew or should have known that
they would be relied upon by the representatives of the State and
members of the Budget Sub-committee. The plea may stand as against
Wardley and Wardley Securities and Yonge in relation to the negligence
claims. It has no part to play against the other respondents. This
may be achieved by inserting the words:
"and the second, fourth and sixth respondents"
before the words "should have known" appearing in para 57.

"Requested, Stated, Informed" - Paragraphs 12, 15, 16 and 18

82. It was submitted that the reference in paras.12, 15, 16 and 18 to various parties requesting, stating or informing other parties of certain things is embarrassing. Subject to what has already been said about these paragraphs, this objection is not made out.
Reference to Data and Repetition of Matters Paragraphs 18, 20 and 30

83. A group of objections was taken to the alleged vagueness of such allegations as "Bond referred to certain data" in para 18; "Yonge ... by reference to the whiteboard confirmed..." in para 20; and "Beckwith ... repeated the substance of the statements..." in para 30. In my opinion none of these pleas is embarrassing.
"Significant Extent" - Paragraph 24(h) and 36(h)

84. Paragraphs 24 and 36 allege that at the Saturday and Sunday meetings respectively the representatives of the State who attended and the Budget Sub-committee knew and Connell appreciated that they knew that:

"The proposal to solve the existing and anticipated
liquidity problems of Rothwells was for the benefit of
Rothwells and, to a significant extent, of Connell."

Objection is taken to the vagueness of the term "significant extent". It refers however to the state of mind of Connell and the representatives and, in my opinion, is not objectionable.

85. In this section of the submission also, counsel for Connell contended that in paras 63, 64 and 65 there is no plea that Connell actually knew of any of the particular things pleaded in those paragraphs. But as the State points out, there is no need to plead that he knew those things were true. It is sufficient for deceit that he knew his representations were false, a plea which was made in para 60.
Material Facts to Be Disclosed - Paragraphs 46, 47 and 48

86. I do not propose to deal separately with Connell's objections in relation to these paragraphs. For the reasons outlined in dealing with the objections raised by Wardley, Wardley Securities and Yonge, they can stand.
Bond Fee - Paragraph 66

87. Paragraph 66 alleges that at the time of the Saturday and/or the Sunday meetings Bond and Connell had agreed with Rothwells would pay Bond Corporation a $16 million fee for its role in arranging the capital raising and indemnity. Alternatively , it is said the agreement was reached before midnight on 26/27 October. It is pleaded that there was an obligation to disclose this agreement to representatives of the State or the Budget Sub-committee in the light of earlier statements that Bond Corporation was receiving no fee. It is alleged that no such disclosure was made. Objection was taken to the alternative pleas and the alleged rolling up of four causes of action. In this respect, I accept the submissions made by the State that the alternative pleas falsify representations pleaded elsewhere and can support a plea that Connell, by his conduct, falsely represented that Bond Corporation was not charging or receiving a fee. Paragraph 66 can stand.
Paragraph 67

88. This is related to the preceding paragraph in that it alleges the payment of a fee of $16 million by Rothwells to Connell on or about 19 November 1987. It can stand.
The Connell $70 Million Contribution - Paragraphs 16(a), 30(d) 35(b) and 36(g)

89. It is conceded by the State that the pleaded representation that Connell was committing his entire personal assets of $70 million to Rothwells plays no direct part in any cause of action. Nevertheless it is said that it is a necessary plea in order to place the actionable representations in their proper context. It is also a plea relevant to reliance by the State on Connell's other statements. I accept those submissions.

90. Remaining objections set out in the written submission on behalf of Connell relate to the pleading of implied representations and incorporation by reference of some paragraphs in others notably in paras 50, 51, 52, 60, 61 and 62 and the pleading of fraud in para 60. These matters have been addressed earlier in the reasons to the extent that I consider necessary for present purposes.
Knowingly Concerned

91. Objection is also taken to the allegation that Connell was knowingly concerned with the conduct of Wardley, Wardley Securities and Bond Corporation. The State contends that there are various facts pleaded to support these allegations, but that in any event the only pleading necessary was that Connell adopted or endorsed the representations made by or on behalf of the companies and knew of their falsity in the circumstances of a rescue proposal jointly put to the State for the benefit of himself and his company. In my opinion that is at least an arguable proposition and the plea of knowing involvement will not be struck out.
Rothwells 1987 Accounts

92. Various objections were taken to the references in the pleadings to these accounts. Subject to the view I have formed of the reference to "significant loans" in para 17 and having regard to the submissions made by the State, I am not persuaded that the reference to the accounts is otherwise embarrassing.
CONCLUSION

93. A substantial attack has been mounted by the various respondents against the consolidated statement of claim. A significant number of deficiencies has been exposed. But although the statement of claim is complex and its various parts interdependent, the deficiencies are not enough to undermine its essential integrity. For the most part they can be cured by amendment. Further, I am satisfied that subject to appropriate amendments the issues raised by the State against the various respondents are adequately defined. Subject to the filing of a further amended statement of claim, programming orders can be made to enable this action to progress to trial. Questions arising out of the position of Mr Connell because of pending criminal proceedings against him must be dealt with and the programming directions should take account of any motion he may wish to bring in that regard. I will make orders striking out the objectionable elements of the consolidated statement of claim with leave to amend and will allow the parties a short time to bring in a minute of proposed directions and to make submissions on the costs of the motions dealt with in this judgment.